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Important Tips before going for Home Loan

Buying a home is like a dream come true and also one of biggest real financial decision of any body’s life because before planning to buy a new house or an old one , or construct an existing house ,all it need a huge sum of money to turn their dream into reality . And Home loan is the ultimate savior which fulfill our urgent financial need in form of home loan , So before going for home loan consider some point such as EMI , interest rate ,tax benefit , eligibility which helps better to understand the every aspects while apply for home loan .Purpose of taking home loan • To buy or construct a new house • To buy an existing (old) house • To extend, repair, renovate or alter an existing house • To buy a plot of land meant for purpose of construction of houseEligibility for home loan • Minimum age of applicant: 21 years • Salaried or self-employed with regular income • Nature and amount of loan • Number of dependants • Spouse’s and other family member’s income • Assets, liabilities, stability and continuity of occupation, • Income, expenditure and savings history.Loan Amount The biggest myth of people is that bank sanction the 100 Percent of loan amount or gives total cost of property as a loan, but generally bank and Housing Finance Company (HFCs) sanction 80 % to 85 % of the cost of property including the cost of registration, land cost and other charges. For Repairs and construction the loan amount will be 70 % of cost. A loan amount is also calculated on the basis of age of applicant and the Net Month.Age • Age Between 21 To 45 years: The maximum loan amount you will get equal to 50 times total of Net Monthly Income (NMI) which is net monthly income after all deductions including deductions like Provident Fund (PF) and Income Tax from Gross Income and other income from all sources. • Above 45 Years: The maximum loan you will get equal to total 36 times of NMI as above and others income from all sources.Processing Fees & ChargesFor Banks • Processing fee: normally 0.5 % of loan amount at the time of application and service tax. • Search report charges by the Advocate at the time of sanction.For Finance Companies • Processing fee: generally 0.8 % of loan amount • Administrative charges: 1.00 % of loan amountDocuments Required for Home LoanFor Salaried Individuals • Latest Salary slip • Form 16 A • Proof of identity : Voters ID card / Passport /Driving License/PAN/ADHAAR Card • Proof of Residence Current • Address : Utility Bills/Property Tax Receipt/Passport Ration Card/Telephone/Electricity Bills • Passport size photographs (as applicable) • A copy of bank statement for the last six months • Statement of Bank Account/pass book for the last six month • Personal Assets and Liabilities statement on Bank’s formatFor Self-Employed/Businessmen • Proof of Business Address • Copies of IT Returns or Assessment orders(for 2 years ) duly acknowledged by IT Department • P&L Account & Balance sheet for the last three years • Copy of partnership Deed/Memorandum of Association ,as the case may be • Proof of identity : Voters ID card /Passport Driving License/PAN/ADHAAR Card • Proof of Residence/Current Address Utility Bills/Property Tax Receipt/Passport Ration Card/Telephone/Electricity Bills • Passport size photographs (as applicable)For NRIs • Copy of Passport (including page containing Visa Stamping) • Copy of valid work permit/Employment Contract/Appointment Letter • Proof of current Overseas residence • Details of Previous employment (if any ) • And identity card issued by the current employer • Latest Salary slip and Tax Returns (if applicable) • Statement of Overseas Bank Account for the last six months • Proof of Income in case of Self Employed /Professional • Copy of Continuous Discharge Certificate (CDC) in respect of applicants employed in Merchant Navy • Power of Attorney (if applicable ) • On Bank’s format duly stamped and Notarized or attested by the Indian embassyInterest Rates The interest rate is one which every buyer should take care , before going for home loan it is imperative for home loan taker whether they take loan on fixed interest rate or floating interest rate , it is necessary to evaluate both the option and go for best option .Fixed interest rate In Fixed interest rate repayment of home loans in fixed equal installments over the entire tenure of the loan, the interest rate are fixed or does not change with market fluctuations. In the fixed interest rate the major portion of monthly payments are used to pay the interest on loan and principal is pay in the later portion of the loan period.Benefits • Interest rate remains fixed irrespective of market fluctuation , banking policy • A fixed interest rate home loan is good option for those who want a fixed monthly repayment or fixed EMI . • It is best for those who are good at budgeting i.e. know there monthly expenses ,saving and separate a fixed part of income for repayment of EMI , it is useful in planning future expenses and helps in taking sound financial decision , tax planning which give a sense of stability and security .Floating interest rate The rate of interest which fluctuates according to the market condition or marketing lending rate. Floating interest rates are contained with a base rate plus a floating element thereof. So, if the base rate changes the floating interest rate also changes.Benefit • Floating interest rate is cheaper than fixed interest rates. • It give a chance to the borrower will qualify for a larger loan amount • In floating rate when the base rate and market situation goes down it lower down the EMI or interest rate as it remains stable in the fixed rate, which is definitely save some money or minimize the burden of paying EMI for some period of time as market condition rate are favorable .EMI (Equated Monthly Installment) A fixed payment amount made by a borrower to a lender at a specified date each calendar month. Equated monthly installments are used to pay off both interest and principal each month, so that over a specified number of years, the loan is paid off in full. The EMI depends on three factors starting from Loan amount, Interest rate and Time Frame of the loan. • EMI on Fixed Interest Rate For example if the Loan amount is Rs. 10 00 000 and interest rate 14 % then the EMI will be Rs. 13317.41• EMI on Floating Interest Rate For example if the Loan amount is Rs. 10 00 000 and interest rate 12.47 % then the EMI will be Rs. 12305.70Tax Concession • Tax on Interest repayment of the Home Loan As per Sec 24(b) of the Income Tax Act of India, 1961, you can obtain a deduction up to Rs. 150,000 towards the total payable interest on the home loan taken for purchase, construction of house property, repairs, renewal or reconstruction of house property. (The deduction stands reduced to Rs 30,000 in case of loans taken prior to March 1, 1999).The interest payable for the pre-acquisition or pre-construction period would be deductible in five equal annual installments commencing from the year in which the house has been purchased, acquired or constructed. • Tax on Principal repayment of the Home Loan As per the newly introduced Sections 80C with section 80CCE of the Income Tax Act of India, 1961, the principal repayment up to Rs. 1,00,000 on the home loan will be allowed as a deduction from the gross total income of the tax payer subject to fulfillment of prescribed conditions.Security/Collateral for Home loan The mortgage is a legal claim on the house the house or property that secures the promise to pay the debt. Normally, first mortgage of the property is the security for the loan. Generally, the mortgage by way of deposit of title deeds is taken (equitable mortgage) Collateral security could be any of the following: • Personal guarantee of a suitable individual, • Insurance policies • Other investments such as stocks, mutual funds, bonds, savings which is acceptable to the lenderFor information visit at :http://blog.checkfloor.com/2013/11/things-you-know-before-going-for-home-loan/http://www.checkfloor.com

Purpose of taking home loan • To buy or construct a new house • To buy an existing (old) house • To extend, repair, renovate or alter an existing house • To buy a plot of land meant for purpose of construction of houseEligibility for home loan • Minimum age of applicant: 21 years • Salaried or self-employed with regular income • Nature and amount of loan • Number of dependants • Spouse’s and other family member’s income • Assets, liabilities, stability and continuity of occupation, • Income, expenditure and savings history.